Stifel: We're Upgrading DreamWorks Animation To 'Buy' After Meeting Management
In a report published Friday, Stifel analyst Benjamin E. Mogil upgraded the rating on Dreamworks Animation Skg Inc (NASDAQ: DWA) from Hold to Buy, while setting a new price target of $34, following meetings with the management.
Analyst Benjamin E. Mogil said that they came away from the meetings "more positive," as they found the management to be "exceptionally candid about what had creatively gone astray over the last few years from the movie creativity front and how they have pivoted."
Although the company has not given any guidance for Television beyond this year, the management noted that the delivery schedule for its television productions peaks, under the current deals, next year. There were concerns of the Television segment declining in 2017. However, the shows have received critical acclaim and taking into consideration the depth of IP from Classic, it appears that the output deals could get extended, ensuring continued growth in Television in 2017.
Mogil added, "On the Consumer Products front, far more of the revenue target for the year is not tied to feature films, which grants us more comfort with the target's attainability."
In the report Stifel noted, …the company's slate changes are more realistic/in-tune with the evolution in changes in the box office market as the 2012-2014 film challenges were tied to films which skewed older right as the box office began to see changes whereby animation demand was increasingly skewing younger as kids began to age out of the genre earlier. While we view the ability to reduce P&A as more difficult given the need to advertise to two distinct groups (kids and moms), the combination of both cost reductions in production and a younger skewing slate, do position the slate better in our view."
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